What’s so plain about Plain Packaging? – Part One: The policy perspective

If you happen to Google search “plain packaging dispute world trade organization”, the first thing that hits you is that Australia is going to see some tough trading times. Five nations- Ukraine, Honduras, Dominican Republic, Cuba and Indonesia, have decided to challenge Australia’s “plain packaging” laws. In force since December 2012, these regulations mandated that all tobacco products are to be sold in drab green boxes resembling a military or prison issue, while using one particular type of package design. The rules further obligated the tobacco manufacturing companies to include graphic images of diseased smokers, while the brands and brand-names would be printed in small standardized fonts.

It was only natural then, for Indonesia to have joined the four countries preceding it, as it exports more than $US670 million worth of tobacco a year. Don’t forget the nation’s effort to protect its Clove cigarettes industry. (The latest chapter of the story can be found here.)

The Australian Government, as the first WTO member to introduce such stringent anti-smoking regulations, has put up a summary of its countries involvement in the disputes here. As a Reuters’ report indicates, opponents of the law, who say it is heavy-handed and an invitation to counterfeiters, had hoped other countries would hold off from following Australia’s example pending a WTO verdict, but Britain, Ireland and New Zealand have already begun drafting similar legislation. But public health advocates fear the such a legal attacks might still deter other countries from passing strong anti-smoking measures. It is probable that the cost of defending this case, and the risk of being held liable, would intimidate all but the most wealthy, sophisticated countries into inaction.

On 5 May 2014, after a long closed-door meeting,the Director-General of the WTO Roberto Azevedo appointed panellists Mr Alexander Erwin (Chairperson), Mr François Dessemontet and Ms Billie Miller to examine the complaints made against Australia’s laws and the division will soon set up a timetable for the resolution of the same.

Fun fact: Ukraine, by the way, hasn’t exported a single cigarette to Australia since 2005. As it doesn’t really have any direct economic interest at hand, it would be interesting to see the nation establish its locus in the case. The matter seems even more bewildering when you consider that just hours before contesting the anti-smoking law in Australia, Ukraine had passed a bill to outlaw tobacco advertising and promotion. These had been seen to be revolutionary steps in the chain-smoking Eastern European country and the decision to take Australia to the DSB, for supposedly doing the same thing, has everyone stumped.
It would be of no surprise to know that there are reports that suggest Philip Morris and British American Tobacco are providing support to the DR, Ukraine and Honduras. On the other hand, Australia is getting its back patted by the WTO and anti-smokers campaigners around the globe who appreciate the nation’s vanguard role in the fight against tobacco use, which has been reported as the leading cause of preventable death. Health advocates stress countries should be free to decide how best to protect public health, without being second-guessed by unelected trade panels. Moreover, they argue, tobacco products, which kill when used as intended, should not be afforded the trade protections of other goods and services.

But here’s the catch: Honduras, Cuba and the Dominican Republic say the legislation harms their traditional cigar brands, thereby hurting farmers and hundreds of thousands of cigar-sector employees in the three relatively poor countries. In light of this, trade experts maintain that the dispute has the potential to open a Pandora’s box of other cases and could result in the re-writing of the script for the public health debate.

Also, the Ukraine and Honduras challenges each have 37 third parties. If you think about it, that’s a lot of nations having a common economic interest.

In essence, the complainants argue that the laws are discriminatory, “more trade restrictive than necessary” and are unjustifiable since they infringe upon the right of WTO members to issue trademarks. Refuting these claims, Australia seeks to take a more moral approach to the issue, arguing that the legislature is sound, well-considered and designed to achieve a specific and legitimate objective i.e. the protection of public health.

An interesting thing to note here is that this was Indonesia’s first request for consultation; a request they could have denied. This would have forced the complainant to lodge a second, unblockable request. This significant, albeit implied move shows that a battle-ready Canerra wants to get done with the matter as fast as possible. A macroscopic view of the matter brings to light the fact that the WTO has, once again, been provided with an opportunity to decide how to square off trade rules with intense public health issues. The “trade vs. health” debate is hardly settled and if not a final verdict, the resolution of the current case (don’t forget the appeals) could very well lead to a new direction in the understanding of the trade related impacts on global health.
Putting things into perspective, Fredrik Erixon, director of the European centre for International Political Economy clarifies that “What we’re talking about here is the extent to which a government actually can deny a company the right to communicate its own trademark, to distinguish its own goods from other goods”.

I’ll take up a legal analysis of the request for consultations, submitted by the five nations soon.

4 thoughts on “What’s so plain about Plain Packaging? – Part One: The policy perspective”

Your argument in this piece is that Ukraine doesn’t have a “direct economic interest” in the matter relating to plain packaging as it hasn’t exported cigarettes to Australia since 2005. You go on to question (and so does Jayant in the piece mentioned above albeit on the matter of clove cigarettes) the “locus standi” of the countries to initiate consultations regarding the relevant issues.

Isn’t “locus standi” a principle of general international law? From what I understand, the AB has clarified before that it need not transpose such principles into WTO law. To that extent, the AB has even gone to state that principles enunciated by the ICJ and PCIJ relating to a “legal interest” to be shown in order to initiate consultations, cannot be transposed to WTO law. In this regard, I refer to the AB’s stand in EC-Bananas III. A quick look at the analytical index tells me that this position still stands.

Thanks for your well-analzed reply. However, I must clarify a few points. Speaking on behalf of Akhil (even though un-authorized 🙂 ), I think Akhil is just trying to point out that inspite of hardly any cigarette exports to Australia by Ukraine, Ukraine has brought a dispute against Australia. I agree with your point that “economic or trade interest” is not a criteria for initiating a dispute. As you point out, it is sufficient if there are legal implications of one Member’s measure for another Member to initiate a dispute.

My question in Indonesia-Sequencing is what legal right/obligation does the EU have? Till the time the DSU is revised on the issue of sequencing, it is the prerogative of each Member to decide what procedure it wants to resort to. Moreover, even if such a dispute is to be brought, it should be by the United States. Article 1.1 of the DSU clearly lays out consultations are to be initiated on the basis of violation of rights/obligations. As I had asked earlier, my question is: what right does the EU have against Indonesia, with regard to a dispute between US and Indonesia? Because of the systemic interest concept, the EU may participate as a third party by simply reserving its rights. However, this would be possible only in case of a dispute initiated by the United States against Indonesia, and not otherwise.

This is how I see the locus standi issue.

Furthermore, if I am not wrong, the EU has in its request, not made one sentence about any of its rights being violated. No right violated/no locus standi. Or in the context of a non-violation complaint, no nullification or impairment of benefit, no complaint.

I understand that you are questioning the rationale for EU initiating consultations, but to my mind the question still remains about what is the nature of the “rights/obligations” mentioned in Art. 1.1, DSU. From where I am coming, EC – Bananas II has allowed an almost “erga omnes” form of claims wherein the systemic interest or “rights/obligations” that a Member has in order to initiate consultations is the correct/legal (which is obviously subjective to the Member’s interpretation and hence for a Pnael/AB to decide finally) application of the covered agreements. By this I mean, that if a Member X feels that some other Member Y has applied the covered agreements in an inconsistent manner, then this by itself would be a “measure” and would “nullify and impair” the “rights” (the right as interpreted form the AB’s stance in EC Bananas III in this case is to have a consistent application of the covered agreements) of Member X.

The request for consultation is now available and this indeed seems to be the EU’s stance:

“Any act or omission attributable to a WTO Member may be a measure for the purposes of WTO dispute settlement. The measures referred to by the European Union are acts or omissions
attributable to Indonesia. A WTO Member bringing a case under the DSU does not have to demonstrate any special interest over and above the fact of a WTO inconsistency.” (Footnotes omitted)

“…the European Union has a systemic interest in the correct and consistent interpretation and
application of the covered agreements, also and particularly with respect to any suspension of
concessions and possible effects on the European Union, including trade deflection or diversion effects. We have a close interest in these compliance/arbitration panel proceedings.” (p.4)

It’s debatable on how this is extremely litigation friendly this is but in EC Bananas III this is what the AB had to say:

“A WTO Member bringing a case under the DSU does not have to demonstrate any special interest over and above the fact of a WTO inconsistency.”

In this respect, the AB also agrees with the Panel’s observation that WTO members are increasingly interdependent and that, therefore, “Members have a greater stake in enforcing WTO rules than in the past”.

Too much legroom do you think? Or is your argument principally against such a stance?

My apologies for the delay in replying. Believe me, I had typed out a reply to your comment and was about to post it till a technical snag hit all I had typed out, after which I was distracted by responsibilities attached to my paying job! 🙂

You are very right in what you say. I agree with you when I see where you are coming from: your analysis on every Member having a right to a consistent interpretation of the WTO agreements. However, I must point out the difference between Indonesia-Sequencing and EC-Bananas. In EC-Bananas, the EU’s measures were legally, if not economically, affecting the WTO membership as a whole. It was more of an alleged violation in rem. the United States had a very valid legal grounding to utilize the WTO DSM. However, in Indonesia-Sequencing, Indonesia’s measures were not affecting the EU in any way, atleast not legally. If there was any violation as such, it would be against the US in personam as against the WTO membership in rem. It is on this basis that I see that the EU doesn’t have any “cause of action” against Indonesia. I also see that the EU is prejudicing Indonesia’s future DSM options in terms of sequencing-i.e., whether to go to 22.6 first or 21.5. I see an issue in terms of maintainability of the dispute here.and wonder whether a panel would be inclined to dismiss the dispute vide a preliminary issue.

Till the sequencing issue- which is clearly a drafting error-is sorted out through an amendment, I don’t think any Member is bound by a particular interpretation unless and until there is a Ministerial Decision to that effect.